Wednesday, October 31, 2012

You can Tune A Piano

But tunafish in pouches is hard to classify.

In Del Monte Corporation v. United States, the Court of International Trade had to determine the correct classification of tunafish in microwaveable pouches from Thailand. The nub of the problem here is that the tuna was packed with sauces of various descriptions. Specifically, there was tuna with lemon and cracked pepper and lightly seasoned yellowfin tuna. The problem here is that tuna in airtight containers is subject to a 6% or 12.5% rate of duty when not packed in oil (depending on origin, etc.). On the other hand, tuna packed in oil is subject to a 35% rate of duty. For comparison, look at 1604.14.22, 1604.14.30 and 1604.14.10.

Thus, the ingredients in the sauce became the key issue. The lemon pepper sauce contained sunflower oil along with water, vinegar, and other materials. The oil made up about 2.48% of the weight of the product. The lighlty seasoned sauce also contained sunflower oil and other materials. In this pouch, the oil was only .62% of the weight. The tuna is not prepared or cooked in the oil, which is only in the sauce.

Protector of the Tuna

There were two problems for Del Monte, First, Additional U.S. Note 1 to Chapter 16 says, "[T]he term 'in oil' means packed in oil or fat, or in added oil or fat and other substances, whether such oil or fat was introduced at the time of packing or prior thereto." Second, there is a 1915 court decision in which the Court of Customs Appeals stated that it does not matter how the oil is applied, only that it is is part of the substance in which the fish is found packed at importation.

Faced with those two rules to follow, the Court of International Trade upheld Customs and Border Protection's classification of the fish. The fact that the Food and Drug Administration would not treat this as "in oil" did not control the CBP classification. And, the logical and scientific arguments indicating that the oil in the sauce was only a small portion of the product and was incidental to the water and other ingredients did not give the Court grounds to reverse Customs.

There was also a value issue in the case. Specifically, the importer protested the appraisal of the merchandise on the basis of post importation negotiations that resulted in a price decrease. The Court found no reason that these adjustments would not be rebates under the customs regulations and, therefore, properly ignored for purposes of valuation. If you are interested, see 19 U.S.C. 1401a(b)(4)(B).

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